Claude Bruton v. Smithfield Foods, Inc.

Claude Bruton v. Smithfield Foods, Inc., Minnesota Supreme Court A18-0914 (February 27, 2019)

The Minnesota Supreme Court affirmed the W.C.C.A. and held that an employee’s claim for temporary total disability benefits cannot be offset by benefits paid for the same period of disability under the employer’s self-funded, self-administered short term disability (STD) plan.

The Employee fell and dislocated his right shoulder on August 25, 2016.  Originally, primary liability was denied and the Employee received STD through a plan which was paid and administered by the Employer.  STD was paid at 80% of the Employee’s regular wages, and taxes were withheld from these payments.  On April 7, 2017, the Employer and Insurer belatedly admitted liability and began paying temporary total disability payments (TTD).  A payment was made to the Employee for the difference tax treatment between STD and TTD payments.

At hearing, the issue was whether the Employer and Insurer were entitled to an offset of TTD benefits for the STD benefits paid.  The issue went to the Compensation Judge on stipulated facts, including that Smithfield owned the funds held in this plan and administered the plan on behalf of its employees and that this was not an ERISA plan. The Compensation Judge found that the Employer and Insurer were entitled to an offset of TTD benefits for STD benefits paid.

The W.C.C.A. reversed the Compensation Judge holding that no offset was applicable based upon the facts on the record.  The W.C.C.A. specifically found that (1) STD payments were not wage continuation prescribed by the statute, as they were paid at 80% of the normal wage; (2) that although the parties and the Compensation Judge seemed to regard the STD plan and the Employer as synonymous, there was insufficient evidence establishing that the Employer and the STD plan were the same entity; (3) as the Employer and the STD plan were not the same entity, the STD plan was required to intervene; and (4) even if the STD plan intervened, the STD policy failed to provide a right to reimbursement in the case of improperly paid STD benefits.

The Employer then appealed to the Minnesota Supreme Court. In arguments Smithfield conceded that there was no statutory provision providing for an offset of short term disability benefits.  Instead, they argued that public policy required that the Employee should not have a “double recovery.”  This would essentially penalize an employer for providing a well-intentioned additional benefit plan to its employees.  However, the Minnesota Supreme Court noted that the Legislature must address any deficiency in the law and that the Judiciary is unwilling to expand offsets beyond the statutory plain language, as previously noted in Ekdahl.

Interestingly, the Minnesota Supreme Court found that the W.C.C.A. abused its discretion when it disregarded the parties’ stipulation that Smithfield and its short term disability plan are the same entity for the purposes of this case.  The Minnesota Supreme Court also disregarded the W.C.C.A.’s analysis of the scenarios where an offset may be appropriate as the parties agreed that those scenarios were not applicable.

Finally, Justice Thissen wrote a concurring opinion emphasizing that short term disability plans may still intervene and seek reimbursement for benefits paid.  However, in this case Smithfield’s policy had no provision for it to claw back benefits after temporary total disability benefits were paid.

Employers paying STD benefits should be prepared in court to have their plan intervene and to prove that the plan contract requires reimbursement of STD benefits should it be determined that the Employee’s period of disability was due to a work injury.